A U.S. District Court in Houston dismissed complaints by participants in 401(k) plans administered by BP PLC that corporate and plan executives had breached their fiduciary duties by permitting participants to invest in a BP Stock Fund.
U.S. District Judge Keith Ellison on Oct. 30 agreed to BP's petition that the class-action lawsuit be dismissed against several BP corporate entities, plan executives and corporate executives. Mr. Ellison gave plaintiffs' attorneys 15 days to replead their complaint against one executive.
The case represents the consolidation of similar suits against BP. Participants in two of BP's 401(k) plans had asked the court to allow their complaints to also apply to two other BP plans as well. Each of the four plans allowed the option of investing in the BP Stock Fund, which was composed entirely of BP American depository shares.
Plaintiffs argued defendants breached their fiduciary duties regarding the BP Stock Fund when BP shares declined following the April 20, 2010, Deepwater Horizon oil rig explosion in the Gulf of Mexico.
The participants accused the defendants of violating their duties of prudence, misrepresenting or omitting “relevant” information and failing to adequately monitor other fiduciaries in the operation of the stock fund, according to court documents.
Mr. Ellison first dismissed allegations against BP on March 30, 2012. He ruled participants had failed to rebut a legal principle — the presumption of prudence — that defendants in many so-called stock-drop cases had used often and successfully to secure dismissals. This principle created a high bar for plaintiffs to prove that company stock wasn't a presumptively prudent investment option for retirement plans.
But in June 2014, the U.S. Supreme Court unanimously rejected the presumption of prudence principle, which was created by a 1995 U.S. appeals court ruling in Philadelphia. The Supreme Court issued new guidelines for courts to review stock-drop cases, and the BP case was remanded to Mr. Ellison.
BP again asked that the case be dismissed. Mr. Ellison agreed, saying that many of the cited defendants — corporate entities and individuals — were not fiduciaries with respect to the employee benefit plans. Mr. Ellison also ruled the participants had failed to prove their claims that defendants had failed in their duty to monitor the BP stock.
Mark Lanier, one of the attorneys for the plaintiffs, could not be reached for comment by press time.